Investing in real estate is one of the most preferred forms of long-term investment in India. Among various cities, Properties in Chennai are considered a strong asset due to consistent development and stable demand. Apart from the rising property value and rental income, investors can also gain several tax benefits through property investment. Let us look into these tax-saving options in a simple and practical way.
Tax Deduction on Home Loan Interest
One of the primary tax benefits of buying a property is the deduction available on the interest paid towards a home loan. According to Section 24(b) of the Income Tax Act, a deduction of up to ₹2 lakh per year is allowed on the interest paid on a home loan for a self-occupied property.
For let-out or rented properties, there is no upper limit on the interest deduction. However, the total loss that can be claimed under the head “Income from House Property” is capped at ₹2 lakh per year. The balance can be carried forward for up to eight assessment years.
If you have invested in properties in Chennai through a home loan, this section can help you bring down your taxable income significantly.
Principal Repayment Deduction
Under Section 80C of the Income Tax Act, the repayment of the principal amount of a home loan is eligible for deduction up to ₹1.5 lakh per annum. This includes payments made towards the principal component of the loan EMI.
But there is one condition: the property must not be sold within five years from the end of the financial year in which the possession was taken. If sold before that period, the deduction claimed earlier gets reversed and added back to your income in the year of sale.
This benefit is applicable for both self-occupied and rented properties, provided the loan is from an approved financial institution.
Stamp Duty and Registration Charges
You can also claim deductions on the amount paid for stamp duty and registration charges. These are usually one-time expenses during the purchase of a property.
Under Section 80C, these charges can be claimed as part of the ₹1.5 lakh limit. But this can be availed only in the year the expenses are incurred. So, if you are buying properties in Chennai, keep your payment documents handy and file the claim in the same financial year.
Additional Deduction Under Section 80EE and 80EEA
First-time homebuyers have extra benefits under Sections 80EE and 80EEA.
- Under Section 80EE, you can claim an additional deduction of up to ₹50,000 per year on the home loan interest. This is over and above the ₹2 lakh under Section 24(b).
- Under Section 80EEA, an extra ₹1.5 lakh deduction is allowed if the stamp duty value of the property does not exceed ₹45 lakh and the loan is sanctioned between specific dates set by the government.
These sections are introduced to support affordable housing, and buyers of entry-level properties in Chennai can make good use of these deductions.
Tax Benefits on Joint Home Loans
If you have taken a joint home loan along with a family member such as a spouse or parent, both co-borrowers can claim separate deductions. Each borrower can claim up to ₹2 lakh for interest under Section 24(b) and ₹1.5 lakh for principal repayment under Section 80C, if they are co-owners of the property and repay the loan from their respective incomes.
This doubles the overall tax benefit for a family and makes joint investment a smart financial move when planning to buy properties in Chennai.
Rental Income and Tax Deductions
If the property is rented out, the rental income is taxable under “Income from House Property.” However, you can reduce the taxable rental income through a standard deduction of 30 percent under Section 24(a). This deduction is allowed for repair and maintenance, regardless of the actual amount spent.
In addition, interest on a home loan can be claimed fully (subject to the ₹2 lakh cap on overall loss from house property).
So, if you own properties in Chennai that are generating rental income, you can still reduce the tax liability by applying this standard deduction and loan interest claim.
Tax Exemption on Capital Gains
If you sell your property after holding it for more than two years, the profit is classified as Long-Term Capital Gains (LTCG) and taxed at 20 percent after indexation. But there are ways to reduce or avoid paying this tax:
- Section 54: If the profit from selling a residential property is reinvested in another residential property within a given time frame, the capital gains can be exempted.
- Section 54EC: You can also invest up to ₹50 lakh in specified bonds (like REC and NHAI) within six months from the date of sale to save tax on LTCG.
For owners of properties in Chennai, these options are useful when upgrading or shifting investments without attracting huge tax bills.
Conclusion
Investing in properties in Chennai is not only a good decision for asset appreciation and rental income, but it also offers many tax benefits. From home loan deductions to capital gains exemptions, there are several sections under the Income Tax Act that can help you save money legally. By understanding and using these benefits, you can reduce your annual tax outgo while building a strong asset base. Before investing, consult a tax expert or financial advisor to make the most of these available options and structure your investment in the best possible way.
